The Wholesale Club.

• Author: Diggle, Raymond H.
• Position: Company profile

The Wholesale Club

The Wholesale Club (WHLS), incorporated in 1982, is a self-service, cash-and-carry membership warehouse. The company has 22 stores in Indiana, Ohio, Wisconsin, Michigan and Minnesota. Each warehouse approximates 100,000 square feet and is standardized for no-frills operating efficiency.

The Wholesale Club was the best-performing stock in our Indiana data base in 1988. Year-to-date, WHLS is up 86 percent from $7.625 on Dec. 31, 1988. While sales have grown rapidly, the company posted losses until mid-1988. Although WHLS is clearly a hypergrowth stock and we expect sales volumes to reach the $550 million range in 1989, we recognize that the Midwest market is subject to an economic slowdown in 1990.

Our earnings estimates, therefore, are conservative and reflect the fact that WHLS makes most of its profit in the fourth quarter when we expect to see the economy begin to slow. We note, however, that in Texas an economic slowdown caused consumers to "trade down" to cheaper...